AirAsia India flies into loss in first month

Co had started operations with promotional fares; targeting a breakeven by December

AirAsia India has incurred a loss of Rs 26 crore in the first month of its operations, according to the statement by its one of its promoter Air Asia Berhad on the Malaysian stock exchange.

AirAsia Berhad, which has 49% stake in the latest low-cost airline to set shop in India, released the numbers last week as part of its April-June results.

"AirAsia India recorded a net loss of ringgit 13.8 million (quarter ended June 30, 2013: RM nil) in the quarter under review," the airline said in a statement.

AirAsia India, a joint venture between AirAsia, Tata Sons and Telestra Tradeplace, started its operations on June 12, with first flight between Bangalore and Goa.

The airline had earlier said it would concentrate on Tier I and II cities in order to keep its costs under control. It had also said its breakeven would be delayed to December due to delay in plane deliveries and a plan to boost investment in the fleet. The airline was earlier targeting a breakeven around October.

The entry of AirAsia India has led to a fare war in the Indian skies, with competitors – IndiGo and SpiceJet – offering ongoing discounts on various routes.

Currently, most airlines are bearing financial losses, due to high price structure in the Indian aviation sector. Therefore, analysts expect that the competition will remain stiff for AirAsia India.

"AirAsia may have underestimated the capacity of Indian carriers to pursue irrational pricing. The incumbents have shown a regular tendency to discount heavily to generate cash, gain market share, fill excess capacity or simply to respond to competition," said a report released by aviation think-tank Centre for Asia Pacific Aviation (Capa) in May.

"It is very difficult to operate in a market in which your competitors seem to have an almost insatiable appetite to lose money," the report had said.

As per the estimate, over the last seven years, Indian carriers lost Rs 59,400 crore, or an average of $22 every time a passenger boarded an aircraft.